Hiring International Contractors: Contracts, Pay Schedules and Compliance

There are four common ways to work with someone in another country: sign a direct contractor agreement, use an Agent of Record (AoR) that engages and pays contractors for you, use an Employer of Record (EoR) that employs the person on your behalf, or set up your own legal entity there and hire locally. Which one fits depends mostly on how much control you will have over the work.

Control matters because of classification. If you will set the hours, direct the tasks and treat the person as part of your team, tax and labor authorities in many countries may look past the word "contractor" and treat the person as an employee.

This guide explains how that classification works, what each option involves, what a cross-border contract should cover and how to get payment dates right when two countries' calendars and banks are involved.

Please treat this page as general information, not legal or tax advice. Rules differ by country and change over time, so check your situation with a qualified adviser in each country involved.

Contractor or employee: why classification decides everything

Every other choice on this page follows from one question: is this person running their own business, or working in yours?

Authorities answer it from the facts of the relationship, not from the title on the contract. In the United States, the IRS groups the evidence into three categories:

• Behavioral control: does the company control, or have the right to control, what the worker does and how they do it?
• Financial control: who controls the business side of the job, such as how the worker is paid, whether expenses are reimbursed and who supplies tools?
• Type of relationship: are there written contracts or employee-type benefits, is the relationship expected to continue, and is the work a key part of the business?

The IRS says no single factor decides the outcome, that businesses should weigh the whole relationship, and that they should document how they reached their conclusion. It also addresses remote work directly: someone working from their own location is an employee under the common-law rules if you can control what will be done and how it will be done.

Getting it wrong has a price. According to the IRS, a business that treats an employee as an independent contractor without a reasonable basis may be held liable for employment taxes for that worker (Internal Revenue Code section 3509). Either side can ask the IRS for an official determination on Form SS-8, although the IRS notes that a determination can take at least six months.

US wage-and-hour law uses a separate test, and its status has shifted. The Department of Labor's 2024 independent-contractor rule took effect on 11 March 2024. On 26 February 2026 the Department proposed rescinding it and returning to an "economic reality" analysis similar to its 2021 rule, built on two core factors: the nature and degree of control over the work, and the worker's opportunity for profit or loss based on initiative or investment. The proposal also says the parties' actual practice matters more than what a contract makes theoretically possible. The comment period closed on 28 April 2026; when we checked on 1 October 2026 we had not found a published final rule, so check the Department of Labor's site for the current position. Under both versions, control sits at the center.

Other countries ask similar questions in their own terms. In the United Kingdom, GOV.UK says someone is probably an employee if most of a list of conditions are true, including being required to work regularly, having a manager decide how and when work is done, being unable to send someone else in their place, and getting paid holiday. GOV.UK also warns that a person can have one status for employment law and another for tax, and that getting status wrong can lead to unpaid tax and penalties. Germany calls the problem Scheinselbstständigkeit (bogus self-employment), and its pension insurer, the Deutsche Rentenversicherung, says the actual working relationship decides when it differs from the contract. Spain's labor inspectorate runs campaigns against the falso autónomo, and Mexico's Ley Federal del Trabajo defines an employment relationship by subordinated personal work in exchange for a wage. Check the test in the country where the person actually works, not only your own.

Your options compared

The questions in the previous section are about how the work is actually done, so answer them before you pick a model.

Direct contractor agreement. You sign a contract with the person or their company, receive invoices and pay them. It is usually the simplest route and is designed for people who run an independent business. You handle the contract, the paperwork and the classification question yourself.

Agent of Record (AoR). A provider sits between you and the contractor. It typically issues the contract, onboards the contractor, collects invoices and makes payments. The model is designed for people who work as independent contractors.

Employer of Record (EoR). The provider becomes the legal employer in the worker's country and runs local payroll, while you direct the day-to-day work. Companies typically use this model for roles that are employment, in countries where they have no entity.

Your own local entity. You register a company, set up local payroll and become the employer yourself. It gives you full control and usually makes sense when you plan to build a team in that country.

What a cross-border contractor agreement needs

A good contract will not save a relationship that is employment in practice, because authorities look at what actually happens. It does make the expected relationship clear, which can prevent payment disputes. Cover these points:

• Scope and deliverables. Describe the outcome you are buying (a design system, a translated manual, monthly bookkeeping), not hours of availability. A contractor decides how and when to do the work.
• Payment terms. State the structure: Net 15 or Net 30 after invoice, milestone payments, an hourly rate or a fixed fee. Say whether the period runs in calendar days or business days, and whose holidays count. Our guides on what Net 30 means and how to write payment terms on an invoice cover the wording.
• Currency and fees. Name the invoice currency, who pays transfer and conversion fees, and which date's exchange rate applies if you convert.
• Invoicing details. List what an invoice must contain and where to send it. Ask your tax adviser which forms you need from the contractor; a US payer, for example, typically asks a foreign individual for IRS Form W-8BEN, which the IRS says is given to the withholding agent or payer when requested.
• Intellectual property. Include an explicit assignment of the work product to your company. Rules on what can be assigned, and how, differ by country, so have this clause checked locally.
• Confidentiality and data. Say what the contractor may keep, share or store, and what happens to your data when the work ends.
• Termination. Set a notice period for either side and say how work completed before termination will be paid.
• Governing law and disputes. Choose the law and the forum for disputes. A choice-of-law clause may not stop the worker's country from applying its own employment rules if the relationship turns out to be employment.

Paying people abroad: schedules, currencies and holidays at both ends

Four things move the real payment date.

Business days versus calendar days. "Net 15" on its own does not say whether weekends and holidays count. If your contract says "15 business days", it also needs to say which country's business days. A period counted on your calendar can end on a day when the contractor's bank is closed, and the other way round.

Public holidays at both ends. A holiday in your country can stop your bank from sending; a holiday in the contractor's country can stop their bank from crediting. Use each country's calculator, such as the Philippines business day calculator and the US business day calculator, or browse all 25 countries.

Bank cut-off times and settlement. Banks process payments on their own business days and cut-off times. In the US, for example, the Federal Reserve's Fedwire Funds Service observes all Saturdays, all Sundays and the Federal Reserve Banks' holidays; its cut-off for customer transfers is 6:45 p.m. ET, and your own bank may set an earlier one. A cross-border payment can then pass through intermediary banks before it reaches the contractor. Our guides to wire transfer cut-off times and international remittance settlement times explain the steps.

Different weekends. Not every country rests on Saturday and Sunday. In Qatar, for example, Amiri Decision No. 57 of 2025 sets the working week from Sunday to Thursday and makes Friday and Saturday the weekly rest days, so a Friday payment to someone there lands on their weekend. Our guides to the Sunday to Thursday work week in the Middle East and the working week around the world cover the other countries that schedule their week differently.

Worked example: a Philippine contractor invoicing a US company

A designer in the Philippines sends an invoice dated 18 December 2026 to a client in the United States. The contract says "Net 15". Depending on how the contract defines that period, the due date changes:

Five non-working days fall inside this window: Christmas Day (25 December) and New Year's Day (1 January) in both countries, and Christmas Eve (24 December), Rizal Day (30 December) and the Last Day of the Year (31 December) in the Philippines only. Those three extra Philippine days are why the Philippine count ends three business days after the US one. The calendar-day count, meanwhile, ends on a Saturday, when neither bank is open, so a contract that counts calendar days also needs to say whether a due date on a non-business day moves forward or back; our guide to due dates that fall on a weekend or holiday covers the usual conventions.

The due date is when the money should arrive, not when you press "send". Friday 15 January 2027 is itself a US business day, so it is the last day the client's bank could send for the "both calendars" date, and only a payment that arrives the same day would make it. A transfer that usually takes two business days to arrive has to be instructed by Wednesday 13 January 2027, before the bank's cut-off. Allow for the time difference as well: on 18 December 2026 Manila is 13 hours ahead of New York, so a transfer sent in the US afternoon goes out in the small hours of the next morning in Manila.

Write the counting rule into the contract once, and both sides can check the same date. The same thinking applies to payroll; see payroll cut-off dates around weekends and holidays.

Time zones, working weeks and leave

Overlapping hours. Agree a window when both sides are online for calls and approvals, and put deadlines in one named time zone. The time zone business hours overlap tool shows the shared hours for two locations. With contractors, keep this to coordination; the Deutsche Rentenversicherung lists set working hours as a sign of bogus self-employment, and GOV.UK lists being required to work regularly and to do a minimum number of hours as signs of employment.

Different working weeks. A Sunday to Thursday team and a Monday to Friday team share four working days a week, Monday to Thursday. Plan reviews and payments for the shared days.

Leave. Contractors schedule their own time off; paid leave is one of the employment signals on GOV.UK's list. Employees hired through an EoR are different: they carry the statutory leave of their country, and the minimums vary widely.

Parental leave differs just as much; the maternity leave calculator helps you plan around it.

Where Payoneer Workforce Management fits

Payoneer Workforce Management is a platform that offers three services: Contractor Management, Agent of Record and Employer of Record. The descriptions and figures below come from Payoneer's own materials.

Payoneer describes two of the services in one line each:

• Agent of Record: "Onboard, Pay and Manage Contractors Globally"
• Employer of Record: "Onboard, pay, and manage global employees on our unified platform."

Coverage and currencies. Payoneer's materials list "160+ countries and territories covered" and "70 currencies supported".

Who provides the services. Payoneer's materials state: "Skuad Pte Limited (a Payoneer group company) and its affiliates & subsidiaries shall provide EoR, AoR, and contractor management services."

For details of each service and the countries it covers, see Payoneer directly. Its pages are in English.

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Payoneer Global Workforce Management

Checklist before you hire your first international contractor

1. Write down how the work will run in practice: who sets hours, who decides how tasks are done, whose equipment is used.
2. Compare that description with the classification test in the worker's country, and get local advice if it looks like employment.
3. Choose the model: direct agreement, Agent of Record, Employer of Record or your own entity.
4. Use a written contract that covers scope, deliverables, payment terms, currency, IP assignment, confidentiality, termination and governing law.
5. Define "Net" periods as calendar or business days, and name the holiday calendar that applies.
6. Check public holidays and weekends in both countries for your first few payment dates.
7. Confirm your bank's cut-off time and how long a transfer to that country usually takes.
8. Collect the tax forms your adviser says you need before the first payment.

FAQ

Can I hire someone in another country without setting up a company there?

Yes. You can sign a direct contractor agreement, use an Agent of Record for contractors, or use an Employer of Record, which employs the person on your behalf in their country.

What is the difference between an Employer of Record and an Agent of Record?

An Employer of Record becomes the person's legal employer in their country and runs local payroll. An Agent of Record handles contracts, invoices and payments for people who work as independent contractors. Which one fits depends on how the work will actually be done.

How do I know if an international contractor should be an employee?

Look at control. If you set their hours, direct how the work is done, supply their tools and treat them as part of your team, authorities such as the IRS, GOV.UK and Germany's Deutsche Rentenversicherung treat these as signs of employment. Check the test in the country where the person works.

What happens if I misclassify a contractor?

It depends on the country. The IRS says a US business that treats an employee as a contractor without a reasonable basis may be liable for employment taxes for that worker. GOV.UK says employers and individuals may have to pay unpaid tax and penalties if employment status is wrong.

Do public holidays affect Net 15 or Net 30 payment terms?

They do if your terms count business days, or if the due date lands on a day when either bank is closed. Write into the contract whether the period is calendar or business days and which country's holidays apply, then check both calendars.

What should a contract with an international contractor include?

Describe the outcome you are buying, the payment terms (including whether "Net" periods count calendar or business days and which holidays apply), the currency and who pays fees, the transfer of intellectual property, confidentiality, notice for termination, and the governing law. Have clauses on intellectual property and governing law checked in the contractor's country.

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